Ciena Corp. (Nasdaq: CIEN) today announced a multiyear supply agreement with AT&T Corp. (NYSE: T). Terms of the deal were not disclosed, but AT&T and Ciena say it's an open-ended contract of the "standing purchase order" type (see Ciena Scores AT&T Contract).

"Given the history of their relationship, it's good to see AT&T awarding business to Ciena," says analyst Michael Ching of Merrill Lynch & Co. Inc. (NYSE: MER).

The history to which Ching refers dates to August 1998. At that time, AT&T nixed Ciena as a potential long-haul DWDM supplier in favor of Lucent Technologies Inc. (NYSE: LU). Ciena was on the verge of a merger with Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), and the deal quickly went south when news of the rejection surfaced. Despite much speculation, allegations all 'round failed to issue in anything but hard feelings (see The Last Laugh Is On Lucent).

Now, the hatchet seems safely underground. Indeed, AT&T Network Services, which offers local services to businesses in 71 U.S. cities, says it's already tested and certified Ciena's 48-channel MultiWave Metro platform and is using it in live business services in Los Angeles. The MultiWave Metro platform supports data rates to OC192 (10 Gbit/s) and includes a range of interfaces, including gigabit Ethernet.

"We plan to deploy Ciena in more networks, but when and how many we aren't ready to discuss," says Dave Johnson, a spokesperson for AT&T Network Services.

Johnson also says the deal isn't exclusive to Ciena. "We aggressively support a multivendor supply model with at least two primary vendors in every deployment," he says. Ciena is one of the two DWDM metro suppliers; the other is undisclosed.

But, according to Michael Ching, it's likely there's business here for Nortel Networks Corp. (NYSE/Toronto: NT) and ONI Systems Inc. (Nasdaq: ONIS), Ciena's key competitors in the metro space.

Despite its apparently loose and undisclosed terms, the contract seems to endorse the strength of the metro market. According to Ching, by deploying DWDM in its metro business networks, AT&T will send a signal to smaller players that DWDM is the way to go.

At press time, Ciena shares were trading at 66.06, up 5.27 (8.67%).

- Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com